Climate finance pledges are essential to enabling developing economies to harness their potential as clean energy powerhouses. With the right actions, India can not only accelerate its clean energy transition but also set a global benchmark for sustainable growth.
India’s initial Nationally Determined Contributions (NDCs) projected a requirement of $2.5 trillion as climate financing between 2015 and 2030, or about $170 billion annually. The current capital flow covers only 25% of this requirement.
As CoP-29 enters its final stretch, India has amplified its push for grant-based, long-term climate finance under the New Collective Quantified Goal (NCQG). Representing like-minded developing countries (LMDCs), India reiterated its call for developed nations to commit to providing at least $1.3 trillion annually through 2030.
In this context, India needs to adopt a dual approach: attract international capital and prepare its domestic financial markets to redirect local capital toward climate-aligned investments. This strategy supports India’s 2070 net-zero goal and delivers significant economic and environmental benefits across sectors.
At the heart of this effort lies India’s domestic financial sector, particularly its banks, which are the largest source of climate finance outside of the government. Banks must integrate climate considerations into their core decision-making processes to play a transformative role, aligning financial practices with national climate objectives.
Indian banks can take proactive steps through integrated transition planning, drawing inspiration from global counterparts. Recent research highlights how global banks are implementing forward-looking strategies that can provide a strong foundation for Indian financial institutions.
Transition planning goes beyond compliance with anticipated Reserve Bank of India directives on climate risks. It enables banks to create a comprehensive framework that identifies climate risks and opportunities, establishes actionable goals, measures progress and ensures accountability at all levels.
This dynamic process requires banks to leverage climate data effectively for strategy development, risk assessment and lending decisions. While India-specific data is limited, global examples such as Barclays’ ‘Bluetrack’ methodology offer actionable inputs for addressing climate risks.
Banks can embed climate risk into their broader risk management systems by estimating emissions across sectors like energy and aviation and integrating forward-looking metrics, ensuring alignment with India’s climate goals while mitigating exposure to extreme climate events.
The role of tailored financial products is equally important in supporting clients’ transition to low-carbon operations. Global banks are increasingly offering innovative green finance instruments—such as sustainability-linked loans, green bonds and transition bonds—to encourage sustainable practices.
Indian banks are beginning to embrace these products, enabling the mobilisation of private sector investments and expanding the market for climate-aligned financing solutions.
Banks must prioritize the ongoing climate transition at every level to drive meaningful change, starting at the top. Leadership from boards is crucial to ensure that climate considerations are integrated across all functions—from risk management to credit and strategy.
HSBC, for instance, has embedded climate risk into its Risk Appetite Statement, with regular updates made to board committees and the development of climate risk metrics that guide decisions at the business and transaction levels. Such a structured approach fosters resilience and strengthens financial practices.
Finally, capacity building across India’s financial sector is critical to advance climate-aligned finance. Over the past year, civil society organisations and the Indian Banks’ Association have provided foundational climate finance training for bankers.
Expanding these initiatives, alongside peer-to-peer knowledge sharing, can equip Indian bankers with the tools they need to navigate the complex risks and opportunities of climate finance. This ensures that the sector actively supports India’s climate ambitions.
With CoP-29 about to conclude, India must continue to demonstrate leadership on two key areas: advocating increased international support as a voice for developing nations and mobilizing domestic resources to drive climate action.
Embedding climate considerations into financial practices—through emissions targets, disclosures, risk management and green investments—can position India’s financial sector as a cornerstone of the nation’s climate strategy, especially amid global uncertainty.
India’s leadership in championing equitable finance and strengthening domestic systems could set the stage for a resilient and sustainable future.
The authors are, respectively, managing director and senior associate with RMI’s India Program
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